EconPapers    
Economics at your fingertips  
 

Tax evasion and the optimal non-linear labour income taxation

Salvador Balle (), Lucia Mangiavacchi (), Luca Piccoli and Amedeo Spadaro ()
Additional contact information
Salvador Balle: Universitat de les Illes Balears
Amedeo Spadaro: Universitat de les Illes Balears, Postal: Edifici Jovellanos, Crta Valldemossa, km 7,5 07122 Palma de Mallorca (Spain), http://www.uib.cat/depart/deaweb/personal/profesores/personalpages/amedeospadaro/index.htm

No 68, DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada

Abstract: The present work studies optimal taxation of labour income when taxpayers are allowed to evade taxes. The analysis is conducted within a general non-linear tax framework, providing a characterisation of the solution for risk-neutral and risk-averse agents. For risk-neutral agents the optimal government choice is to enforce no evasion and to apply the original Mirrlees' rule for the optimal tax schedule. The no evasion condition is precisely determined by a combination of a sufficiently large penalty and a constant auditing probability. Similar results hold for risk-averse agents. Our findings imply that a government aiming at maximizing social welfare should always enforce no evasion and provide simple rules to pursue this objective.

Keywords: Tax Evasion; Optimal Taxation; Social Welfare (search for similar items in EconPapers)
JEL-codes: D31 H21 H26 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-acc, nep-cta, nep-iue, nep-pbe and nep-pub
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.uib.es/depart/deaweb/deawp/pdf/w68.pdf (application/pdf)

Related works:
Working Paper: Tax evasion and the optimal non-linear labour income taxation (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ubi:deawps:68

Access Statistics for this paper

More papers in DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada Contact information at EDIRC.
Bibliographic data for series maintained by Xisco Oliver ().

 
Page updated 2020-01-28
Handle: RePEc:ubi:deawps:68